Cohen & Steers, Inc. (CNS)

Q2 2010 Earnings Call

July 22, 2010 11:00 a.m. ET

Executives

Salvatore Rappa - SVP & Associate General Counsel

Matt Stadler - CFO

Marty Cohen - Co-CEO

Analysts

Michael Carrier - Deutsche Bank

Alex Blostein - Goldman Sachs

Dov Hellman - Sidoti & Company

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers' Second Quarter 2010 Financial Results Conference Call. During the presentation, all participants will be on a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions). It is now my pleasure to turn the conference over to Mr. Salvatore Rappa, Senior Vice President and Associate General Counsel. Please go ahead, sir.

Salvatore Rappa

Thank you, and welcome to the Cohen & Steers' second quarter 2010 earnings conference call. Joining me are Co-Chairman and Co-Chief Executive Officers, Marty Cohen and Bob Steers; our President, Joe Harvey; and our Chief Financial Officer, Matt Stadler.

Before I turn the call over to Matt, I want to point out that during the course of this conference call we may make a number of forward-looking statements. These forward-looking statements are subject to various risks and uncertainties and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements. We believe that some of these factors are described in the risk factors section of our 2009 Form 10-K, which is available on our website at cohenandsteers.com.

I want to remind you that the company assumes no duty to update any forward-looking statements. Also the presentation we make today contains pro forma or non-GAAP financial measures, which we believe are meaningful in evaluating the company's performance. For detailed disclosures on these pro forma metrics and their GAAP reconciliations, you should refer to the financial data contained within the press release we issued yesterday, and then our previous earnings releases, each available on our website.

Finally, this presentation may contain information with respect to the investment performance of certain of our funds. I want to remind you that past performance is not a guarantee of future performance. For more complete information about these funds, including charges, expenses, and risks, please call 1-800-330-7348 for a prospectus.

With that, I'll turn the call over to Matt.

Matt Stadler

Thanks, Sal. Good morning, everyone and. Thank you for joining us today. Yesterday, we reported net income of $0.27 per share compared to a loss of $0.15 per share in the prior year and net income of $0.21 per share sequentially. The second quarter of 2010 includes an $0.08 per share after tax gain resulting from recoveries on the sale of previously impaired securities. After adjusting for this item, earnings per share were $0.19.

The second quarter of 2009 included a $0.30 per share impairment charge on available-for-sale securities. After adjusting for this item, earnings per share were $0.15. We reported revenue for the quarter of 44.2 million compared with 26.4 million in the prior year and 41.3 million sequentially.

The increase in revenue from the prior year is attributable to higher average assets resulting primarily for market depreciation and institutional net inflows. Average assets for the quarter were 27 billion compared with 14.6 billion in the prior year and 24.9 billion sequentially.

Our effective fee rates for the quarter were 60.5 basis points, down from 61.5 basis points last quarter. The decline was primarily due to a higher proportion of institutional inflows from existing sub-advisory accounts which are lower fee-paying.

Pretax income for the quarter was 15.4 million compared with a pretax loss of 5 million in the prior year and pretax income of 13.5 million sequentially. This quarter's results include a 3.1 million recovery on the sale of previously impaired securities. After adjusting for this item, pretax income was 12.2 million.

The prior year's quarter included an impairment charge of 14 million on available-for-sales-securities. After adjusting for this item pretax income was 9.1 million. Excluding the 3.1 million recovery on the sale of previously impaired securities, our pretax profit margin for the second quarter was 28%.

Our operating margin remained at 30%, now we will review some changes in our assets under management. Assets under management decreased to 26.2 billion from 27.2 billion at March 31.

The decrease in assets under management was attributable to market depreciation of 2.2 billion partially offset by net inflows of 1.2 billion.

At June 30th, U.S. REIT common stocks comprised 45% of the total assets we manage, followed by international REIT common stocks at 25%, large cap value at 11%, preferreds at 8%, and listed infrastructure and utilities at 8%.

Our open-funds had assets under management of $6.6 billion at June 30th, a decrease of 363 million or 5% from the first quarter. The decrease was due to market depreciation of 538 million partially offset by net inflows of 175 million. Domestic portfolios had 121 million of net inflows while international and global portfolios had 54 million of net inflows.

Annualizing second quarter flows our organic growth rate for open-end funds was 10%. For the last 12 months our organic growth rate was 20%. Assets under management in our closed-end funds totaled 5.3 billion at June 30th, a decrease of 421 million or 7% from the first quarter. The decrease was primarily due to market depreciation.

Assets under management in our institutional separate accounts totaled 14.3 billion at June 30th, a decrease of 171 million or 1% from the first quarter. The decrease was due to market depreciation of 1.2 billion, partially offset by net inflows of 1.1 billion, virtually all of which were from sub-advised accounts into global and large-cap value portfolios.

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